The Dunn Corporation is planning to pay dividends of $ 500,000. There are 250,000 shares outstanding, and

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The Dunn Corporation is planning to pay dividends of $ 500,000. There are 250,000 shares outstanding, and earnings per share are $5. The stock should sell for $ 50 after the ex- dividend date. If, instead of paying a dividend, the firm decides to repurchase stock,
a. What should be the repurchase price?
b. How many shares should be repurchased?
c. What if the repurchase price is set below or above your suggested price in part (a)?
d. If you own 100 shares, would you prefer that the company pay the dividend or repurchase stock?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Foundations of Finance The Logic and Practice of Financial Management

ISBN: 978-0132994873

8th edition

Authors: Arthur J. Keown, John D. Martin, J. William Petty

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